Aave (LEND)
Basics * Fka EthLend * DeFi * A P2P lending platform for fixed duration loans on Ethereum * Aave Protocol announced (9-1-2020) their official launch on Ethereum mainnet * "Flash Loans, aTokens, and rate-switching are among the flagship features of the platform, along with the availability of 16 different assets." aTokens * From this blog post (9-1-2020): "Aave has also introduced aTokens, which are interest-bearing tokens that are pegged 1:1 to the value of the underlying asset. They work in a similar way to Compound Finance’s cTokens or chai.money’s CHAI token, which are also backed by other assets and earn interest. Whereas cTokens and CHAI earn interest via value appreciation, aTokens pay interest with an increasing balance of aTokens. In this way, aTokens are always equivalent in value to their underlying asset." Road to Decentralization * From this blog post (9-1-2020): "As with many decentralized finance protocols, the Aave protocol plans to gradually phase into complete decentralization over an extended period of time, to ensure a smooth initial launch and public testing phase. For this initial phase, the Aave team will retain control over the protocol, in order to more easily address any early incidents or issues. The long-term governance plan is currently under development, and will be integrated once this development is completed. The system will incorporate the LEND token, and will all be published in a formal roadmap post within the next few weeks." How Decentralized is it? * Was classified Degree 2 DeFi ''on the HackerNoon rankings of 25-4-2019. "These DeFi products are non-custodial and have one additional decentralized component which could include price feeds, initiation of margin calls, margin liquidity, interest rate determination, or platform development, while the rest are still centralized."'' * A BIG side note, is that the blog was written by Kyle J Kistner who is Chief Vision Officer at bZx. He gave his own project the highest ranking. What a surprise. * From the comprehensive blog post: "Custody: The ETHLend contracts are closed source and non-custodial from the point of loan origination. Initiating Margin Calls: Margin calls are initiated by the lender. They are prevented from prematurely liquidating a position through the price feed. The fact that only one party is in charge of initiating a margin call makes this aspect of the protocol centralized. Margin Call Liquidity: Lenders are in charge of liquidating positions, and they receive an 8% discount on collateral for doing so. ETHLend collects 2% as a fee. The sourcing of margin call liquidity is centralized to the lender. Interest Rates: Interest rates are agreed upon freely by borrowers and lenders. This aspect of the protocol is decentralized. Development: The ETHLend contracts are closed source and partially mutable. The protocol is centrally developed by the team. The core functions are not mutable, but auxiliary functionality such as single loan repayments can be built on top." Is it trustworthy? * From this extensive blog criticising Centralized and Decentralized Finance (16-12-2019): "Ethlend (Aave Protocol) started as an ICO in Autumn 2017. They raised $18M. Their current token marketcap is $13M. The token utility is exactly the same as SALT (almost nonexistent). Ethlend supports more assets than Compound. There is a possibility of significantly higher yield than on Compound if one finds assets that have a low current supply on Ethlend. This is a theory craft as we have not tested this interest arbitrage ourselves. It is likely that the liquidity on Ethlend is too low to exploit this in significant volumes. From a quick peek at the platform and checking the lenders’ side of the market (waiting for lenders), we can observe that the “order book” is very thin. As a peer to peer lending platform, the terms of the loans are set by the loan creator. The information about their price oracle is very limited, with the latest information we could find being from 2017. The team was utilizing a smart contract from Oraclized (currently provable.xyz) and it used only Kraken API price feed. Security audit situation is promising but crude. There has been only one audit finished, namely by Trail on Bits, with one more by OpenZeppelin in progress. Ethlend/Aave Summary: '' ''+ Aave supports FIAT pegged loans + P2P lending ''- Low P2P liquidity/volume'' ''- Outdated information about price oracle'' ''- More audits necessary"'' Critique on their branding * From DeFi Weekly (3-2-2020): "I tried looking into what the tokenomics of Aave actually is but was surprised to realise that I actually couldn't find it. Maybe they still have enough money in the bank, but they're wasting the use of a potentially powerful shilling tool (see: SNX spartans). Apart from tokenomics, I definitely think they could improve their branding to attract more liquidity. The dominant use of the blue/purple gradient is reminiscence of low quality ICOs and doesn't deliver confidence to users that their financial assets are safe. It's a minor point but commonly overlooked by engineering heavy teams." Team, investors, etc. * Part of the portfolio of SVK Crypto Category:Companies/Organisations